CASE STUDY

SYA $$CHARGE IT$$ WITH YOUR CELL PHONE

Wireless operators, credit card companies, and retailers are working on a technology that allows

customers to purchase items by using their cell phones. For example, a customer could purchase

a can of soda by dialing a telephone number on the dispensing machine and have the charge for

the soda show up on their cell phone bill. Working prototypes are currently in use in South Korea,

Japan, and Europe.

The ability to charge items to a cell phone has significant business potential because, unlike in

the United States, credit cards are not nearly as popular in other countries. In Japan and China,

for example, people are much more likely to have a cell phone than a credit card. Japanese

consumers use credit cards for only $5\mathrm{.}5$ percent of their personal spending compared with $33$

percent of U$.$S$.$ consumer spending.

The payoff for credit card companies and cell phone operators from this technology could be

enormous. By associating a credit card with a cell phone, banks and, credit card companies hope

to convince consumers to buy products, such as soda, with their cell phones instead of pocket

change. Of course, they will reap transaction fees for each transaction. Mobile phone operators

see the technology as a way to increase traffic on their networks as well as to position cell phones

as an even more useful and, thus, essential device for consumers. Retailers envision easier

transactions also leading to more sales.

MasterCard International and Nokia are currently testing a cell phone credit card for the U$.$S$.$

market. The phones have a special chip programmed with the user$$s credit card information and

a radio frequency transmitting circuit. Consumers can simply tap their phone on a special device

at a checkout counter equipped with a receiving device that costs the retailer about $$80.$ Betsy

Foran$-$Owens, vice president for Product Services at MasterCard International commented that

with this technology, $$You don$$t have to get off your phone to pay. You can just tap this thing down

at the register$.$ She also noted, $$If you are not going to carry cash around, what are you going to

carry? Your mobile phone$.$

The only players who might not look favourably on the technology are the traditional telephone

companies, who must certainly view the technology as just one more threat to their traditional

telephone business.

Source: Haag, Baltzan and Phillips, $2006.$

QUESTIONS: $50$ MARKS

$1)$ The above case was written in $2006$ when technology was still new, especially in South

Africa. Identify and describe at least three different technological applications described in

the case that are currently in use in South Africa. $10$ Marks

$2)$ Identify any technological applications $-$ if any $$ described in the case but it is not in use

in South Africa. Explain why that$/$those application$($s$)$ are not in use in South Africa.

$5$ Marks

$3)$ Are there some examples of E$-$commerce in the case? If yes, give examples and explain.

$10$ Marks

$4)$ Would you say that technological developments described in the case have offered

businesses opportunities to provide value? If yes, which value drivers have been activated

by those technologies? Explain your answer $15$ Marks

$5)$ Identify and explain three different businesses that were negatively affected by these

technologies $10$ Marks